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Allocation and banking in Korean permits trading

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  • Cho, G.L.
  • Kim, Hyo-Sun
  • Kim, Y.D.
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    Abstract

    This paper investigates how Korean industry would respond to four different allocation and banking options in CO2 permit trading within a fully dynamic computational general equilibrium framework. Four different allocations are categorized--a uniform allocation and three performance-based allocations. We explore that performance-based allocation and banking lower losses in Korean potential GDP, allowing energy-intensive industry more flexibility in inter-temporal decision making on purchasing and selling permits. The steel industry can derive a particular advantage from a performance-based allocation with respect to energy use, while the semiconductor industry would prefer a performance-based allocation with respect to value-added. The two key conclusions are (i) the Korean economy should replace an absolute allocation with a performance-based allocation, and (ii) the banking of permits enables market players to reallocate allowances more efficiently in a long-term commitment period. These results support the findings of the key study by Kling and Rubin (1997).

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    File URL: http://www.sciencedirect.com/science/article/B6VBM-4XKXRSS-1/2/db5e13df801a370bbf662725b487c850
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    Bibliographic Info

    Article provided by Elsevier in its journal Resources Policy.

    Volume (Year): 35 (2010)
    Issue (Month): 1 (March)
    Pages: 36-46

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    Handle: RePEc:eee:jrpoli:v:35:y:2010:i:1:p:36-46

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    Web page: http://www.elsevier.com/locate/inca/30467

    Related research

    Keywords: Permits trading Bankable permits Performance-based allocation Initial allocation Dynamic CGE modeling;

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    1. Rubin, Jonathan D., 1996. "A Model of Intertemporal Emission Trading, Banking, and Borrowing," Journal of Environmental Economics and Management, Elsevier, vol. 31(3), pages 269-286, November.
    2. Goulder, Lawrence H. & Summers, Lawrence H., 1989. "Tax policy, asset prices, and growth : A general equilibrium analysis," Journal of Public Economics, Elsevier, vol. 38(3), pages 265-296, April.
    3. Kling, Catherine & Rubin, Jonathan, 1997. "Bankable permits for the control of environmental pollution," Journal of Public Economics, Elsevier, vol. 64(1), pages 101-115, April.
    4. Cronshaw, Mark B & Brown-Kruse, Jamie, 1996. "Regulated Firms in Pollution Permit Markets with Banking," Journal of Regulatory Economics, Springer, vol. 9(2), pages 179-89, March.
    5. Bernstein, Paul M. & Montgomery, W. David & Rutherford, Thomas F., 1999. "Global impacts of the Kyoto agreement: results from the MS-MRT model," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 375-413, August.
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